First Solar, Inc. (NasdaqGS: FSLR - News ) has entered into an agreement with NRG Energy, Inc. (NYSE: NRG - News ) under which the former will build a 26 megawatt ("AC") Avra Valley solar project for the latter. Under a 20-year power purchase agreement, the electricity generated from the project will be sold to Tucson Electric Power .
Located near Tucson, Arizona, the solar project will utilize First Solar's advanced thin-film photovoltaic technology, mounted on the company's single-axis tracker system, which rotates the solar modules to follow the sun throughout the day. The single-axis tracker system has the capability to extend the peak energy production period and provide more electricity when energy demand is greatest i.e. in the afternoon.
The company expects the construction to begin in March 2012 and complete by the end of 2012 and will likely create 200 jobs.
This is not the first project for which First Solar and NRG Energy have come together. Earlier, they had also worked together on several plants, starting with a 20-megawatt solar plant in Blythe, California. Also, in another deal, NRG had purchased the 290-megawatt Agua Caliente project from First Solar.
First Solar designs and manufactures solar modules using a proprietary thin-film-semiconductor technology, which allows it to reduce its average solar module manufacturing costs to one of the lowest in the world. However, along with its solar peers, the company is witnessing an oversupply of photovoltaic products leading to a steep drop in average selling prices.
The company sells its products to project developers, system integrators, and operators of renewable energy projects primarily in Europe with a distinct focus on Germany. Thus, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. A volatile euro, apprehension over a reduction in European solar subsidies and falling crystalline silicon prices are a matter of nagging concern.
The company presently retains a short-term Zacks #3 Rank (Hold). We have a long-term Underperform recommendation on the stock.
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